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Copyright Disputes and Fee Shifting

Imagine that you were sued for copyright infringement, yet above all odds, you managed to prevail on the merits. Your case went up to the Supreme Court, it found for you, and you have emerged successful. Yet, you are stuck footing the bill to defend yourself against a claim that was in your favor all along.  How will you get out if it? Isn’t there a section of the Copyright Act, specifically written to encourage meritorious claims to better define copyright laws? Shouldn’t the prevailing party be entitled to its attorney’s fees? This scenario has played out in front of the Supreme Court, and decided on this past summer in Kirtsaeng II.

Can’t Kirtsaeng collect his legal fees?

In its ruling, the high court came back with a resounding “maybe.”  After Kirtsaeng’s first case relieved him from liability due to his resale of books falling under the First-Sale Doctrine, he had attempted to recoup his fees.  However, the appellate court declared that he could not get the fees back, as in that circuit, the fees could not be reimbursed so long as the other side had a reasonable claim. Other circuits also had general presumptions against awarding fees to the defending party if they had prevailed, thus there was some disagreement over what constitutes a prevailing party. Yet, when the court ruled in favor of Kirtsaeng here, the result was less a resounding “yes” and more of a clarification for the lower court. The high court unanimously determined the Fogerty standards were too wide (fees are awarded case-by-case and the courts must keep in mind the mounting of a meritorious case). In determining the meritorious aspect, Fogerty listed factors like frivolousness, motivation, and reasonableness. Yet, in the Second Circuit’s rulings, it placed too much focus on the reasonableness of the claims, resulting in the clarification.   In general, the court has discretion to award attorney’s fees to the prevailing party under 17 U.S.C. 505.

What does this mean for the future?

The biggest takeaway is the opening that the prevailing party can be the defendant in a copyright infringement case. Now, for future cases, like the Lenz case, it could further open what a party can be liable for under copyright cases. Essentially, there is no longer a “hometown” advantage for the charging party. However, given the rule is still flexible, it remains a risk evaluation whether someone believes that his/her claim is successful enough to warrant legal fees. Yet, given that courts are supposed to take more factors into account, it also means that it would be much harder to correctly peg how the courts may determine the result, akin to the rather fluid standards applied to fair use defense.  While, this may appear to be minimal in the long run, the larger ramifications may mitigate questionable claims by larger entities, just as it may similarly discourage defendants from going through litigation.

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